[ROCKMAN]

This little editorial rebuke focuses on my left coast cousins but could just as easily focus on Big Oil and many of our politicians. From:

http://www.huffingtonpost.com/2013/04/2 ... 58012.html

“The San Francisco Board of Supervisors unanimously passed a resolution Tuesday urging managers of the city's public employee retirement system to withdraw the approximately $580 million they have invested in major fossil fuel producers.”

IMHO it’s not a matter of agreeing or not with such a move. They are responsible to their members and should follow their lead. For me the issue is style over substance. Making a difference is one thing…pretending to make a difference while in reality the effort does nothing the change the situation (let alone make it a tad worse) is another matter.

How does selling out Big Oil stock help/hurt/make little difference? First, the amount stock ExxonMobil has in the market place doesn't change…at least initially. San Fran may sell their stock but someone still owns it. Invisible difference to XOM’s operations. And if there is a mass selloff of their stock by many: stock price may fall some distance. Effect on XOM: lower stock prices means lower dividends payments which leaves them more capital for more drilling. Of course, XOM isn’t hurting for money: they are sitting on a huge cash reserve like most of Big Oil because they lack enough drilling opportunities these days. So what does XOM and all the other big companies do when their stock prices slide: buy back their own stock cheap. Which lowers their dividend payouts and leaves more capital to drill more as well as buy out smaller companies. Often that's one of the best returns some companies make on their investments. BTW there are some folks that can take a big hit: other investors who see their asset value drop. And the majority of stock ownership of Big Oil is held by other retirement account including those of Big Union.

Now the cynical side of me wonders how much the San Fran decision is based on “morality” and not good business sense. Not sure when they picked up that half $billion in oil stocks. But despite what many folks believe during the recent run up in oil prices Big Oil stock values, like those of XOM, have remained relatively flat for the last 5 years. If pension funds had picked up the bulk of their ownership, say 10 years ago, they have seen about a 100% return not counting those $billions in dividend payments. After 5 years of no significant stock growth of XOM it might be the right financial move regardless of what the company does for a living. Especially true for those of us who don’t see a bright future for the oil patch in general.

So I don’t see any big moral bragging rights associated with such a divestiture. If they wanted some real street cred IMHO they would have invested that $500 million in some alternative energy company, say like Solyndra, instead of buying oil stocks when they were cheaper. Of course, that would have resulted in a big loss for those retirees instead of the US tax payers but that would have put them at the top of that “moral high ground” IMHO.

As I said initially BIG Oil and many national political leaders (in both parties…especially the R’s) are just as guilty of putting style above substance IMHO. I've got my own personal grudge against those cute Chevron ads. IMHO the pointless white noise from both sides over the Keystone Pipeline border crossing permit is a good example we’ve discussed before. None of those PR stunts really do any direct damage IMHO but they do distract folks from discussing potential beneficial policy changes. Which I believe is part of the motivation behind much of our political leadership: a combination of either not having good plan or not wanting to be the messenger of bad news with no solutions to the voting public.

So just my personal ROTD (rant of the day). As always curious how others view such matters.

[Tanada]

IMO this is a good deal for XOM and the other companies that are likely also involved. There is nothing worse than a faithless investor who times their actions for political or cultural reasons having nothing to do with the actual value of the company or their product. Good riddance to them.

On the other hand XOM as you pointed out is swimming in cash, so if the price of there stock dips they can easily buy it up improving their position. What I am most curious about is who is really left for XOM or the other majors to buy out? The tiny companies are of little interest to them, and the other remaining majors are also cash flush and reserve declining.

[Buddy_J]

$this->bbcode_second_pass_quote('ROCKMAN', '
')So just my personal ROTD (rant of the day). As always curious how others view such matters.

[ROCKMAN]

Buddy - You make me look like an amateur when it comes to rants. LOL. Good work.

Tanada – I wouldn’t be surprised to see Chesapeake or Devon go on the sales block next as a result of being hurt by low NG prices. Especially if there is a prolonged dip in oil prices. It wouldn’t be a big shock to see a company like Anadarko pick up one of them or turn around and sell out to one of the majors. Anadarko may be in good financial shape but gets an offer from, say ExxonMobil, that maximize value for the shareholders. Two types of companies are typical acquisition candidates: those doing very poorly but have a significant reserve base and those doing well and have a significant reserve base.

In the oil patch we’ll eat our own. It’s just business…nothing personal. LOL.

[Tanada]

$this->bbcode_second_pass_quote('ROCKMAN', 'B')uddy - You make me look like an amateur when it comes to rants. LOL. Good work.

Tanada – I wouldn’t be surprised to see Chesapeake or Devon go on the sales block next as a result of being hurt by low NG prices. Especially if there is a prolonged dip in oil prices. It wouldn’t be a big shock to see a company like Anadarko pick up one of them or turn around and sell out to one of the majors. Anadarko may be in good financial shape but gets an offer from, say ExxonMobil, that maximize value for the shareholders. Two types of companies are typical acquisition candidates: those doing very poorly but have a significant reserve base and those doing well and have a significant reserve base.

In the oil patch we’ll eat our own. It’s just business…nothing personal. LOL.

[ROCKMAN]

Tanada – “How long before all the accessible significant reserve bases are owned by a handful of companies and they turn to less and less significant reserve holder acquisitions in an attempt to keep up their company reserve profile?” The problem for the big boys isn’t so much the size of the reserves base as the manpower requirement per volume of reserves. ExxonMobil could buy a hundred small independent companies and add a fair chunk of reserves. But they can’t efficiently manage such small operations. The overhead cost for all those bodies kills the profitability. Remember a lot of that small company revenue is sweat equity going to someone’s checking account and not into a company’s annual report. When XOM bought XTO some folks said it was to get a foothold in those unconventional reservoir plays. That year 80% of XOM’s total proved reserves replacement came from just hat acquisition. When have you seen a big headline describing the thousands of wells XOM has drilled on those XTO leases? In reality much have that leasehold has expired without being drilled. A company can acquire another company's 300,000 acres of mineral leases as part of an take over but within a few years most will expire if not drilled. We actually have a tech term in the acquisition game for them: sacrificial leases. The day we close the deal we put them on the books as zero value.

When it starts getting really bad it will be one major buying/merging with another. That’s why there is no more Gulf Oil, Texaco, etc. today. As pointed out before there are no longer 7 Sisters. One day IMHO, maybe many years down the road, there will be just one Sister and a whole bunch of little cousins. LOL.

[Pops]

The Examiner says they've done the same with tobacco and apartheid related companies in the past.

Too bad more people don't try for long term good rather than short term greed.

[Plantagenet]

$this->bbcode_second_pass_quote('ROCKMAN', ' ')San Fran ... Not sure when they picked up that half $billion in oil stocks.

[ROCKMAN]

P - Good point. I also wondered silently if the move to liquidate was to monetize profits to help cover some of that potential short falls you mentioned. The morality explanation might have been to disguise the real motivation. To be honest if I had been running the pension fund I would have flushed the oils stocks after they bounced off the high from the $145/bbl days. You've heard the saying: pigs get fat and hogs get slaughtered. One of the most profitable stock timing moves I've ever seen was a guy forced to liquidate because the IRS was after his butt and he had to secure his debt to them with a no-risk cash position. He pissed and moaned for months about those "bastards" and how they screwed up his plans. And then market crashed. He would have lost more money in the crash then he owed the IRS. They literally saved his ass.

He still hates them. OTOH he was a real tax cheater so I didn’t offer much sympathy. LOL.

[Tanada]

You know the folks here on PO.com forums have a tendency to focus on what the increase in fuel prices has done to themselves as consumers through added personal fuel expense and added consumer expense for everything they buy.

What is frequently ignored or pooh-poohed is that every level of government from Dog Catcher to President of the USA or your local equivalent is also paying twice or three times as much for fuel today as they were in 2004. That means all those budgets they had set up based on 2004 costs were shredded to confetti by increase costs, and that in turn has made them more desperate for e very dime they can get out of the taxpayers at every level.

Its a double edge sword, I don't want to pay twice as much for municipal fuel, but if I need the Sheriff or the Fire Department I don't want them to run out of fuel either. Same goes for the State Police, National Guard or the Ambulance, I am willing to pay what I can to keep them going.

Unnecessary trips for political advantage on the other hand I do not want to be footing the bill for, however given the way things are set up you can't fund one without the other tagging along.

[Buddy_J]

$this->bbcode_second_pass_quote('Plantagenet', ' ') I won't be surprised if SF government retirees wind up down the road with their pensions being slashed because their pension funds were politically correct but poorly managed.

[Graeme]

San Francisco wasn't the first and it certainly won't be the last to divest from FF.

10 Cities Divest From Fossil Fuel Investments

$this->bbcode_second_pass_quote('', 'I')n December, Seattle was the first city to announce it would divest from fossil fuel investments and now nine other cities have joined in.

The nine cities are: Madison, WI; Bayfield WI; Ithaca, NY; Boulder, CO; Rochester, MN; Eugene, OR; Richmond, CA; Berkeley, CA; and San Francisco, CA.


Petitions for divestment are active 100 other cities and states. Modeled on the anti-apartheid campaigns of the 1980s, the fossil fuel divestment campaign started last fall at colleges and universities and has now spread to over 300 campuses across the country.

Four colleges - Unity, Hampshire, Sterling, and College of the Atlantic - have so far agreed to divestment.


In fact, it's riskier to remain invested in fossil fuels. Companies will plow some $6 trillion to explore and develop reserves over the next decade, but that will be wasted on oil and coal that can't be burned as governments move to limit carbon emissions.


When the campaign began in October, Nobel Prize-winner Desmond Tutu noted, "The divestment movement played a key role in helping liberate South Africa. The corporations understood the logic of money even when they weren't swayed by the dictates of morality. Climate change is a deeply moral issue too, of course ... Once again, we can join together as a world and put pressure where it counts."

[ROCKMAN]

Tanada – And being a shared pain doesn’t make it feel any better, eh? You probably already know what group is the largest single consumer of fossil fuels on the planet: the US Dept. of Defense. And if that doesn’t irritate you enough I’ll share this little known tidbit: who sells the majority of those FF’s to the DOD consumers around the globe and thus makes that big profit? BP.

I know…that was mean.

[ROCKMAN]

Graeme – “…but that will be wasted on oil and coal that can't be burned as governments move to limit carbon emissions.” You and I have vastly different expectations of govts as we stumble down the PO path. I see just the opposite future: govt providing incentives for increased FF production. For my daughter’s sake I hope you’ll be correct. But I don’t think so.

[Graeme]

The Economic Case for Divesting from Fossil Fuels

$this->bbcode_second_pass_quote('', 'S')ecurities of fossil fuels firms, as an economic sector, may soon be on the decline.

Predictions as to when oil and gas will become a smaller part of the investment society makes into its total energy mix, in favor of renewables such as solar, wind and ocean energies, vary, ranging from 2060 on the long side (this prediction from oil industry powerhouse Shell) to 2030 or even sooner on the shorter side (as reported by Bloomberg). But so far, markets appear to be mispricing the risk this presents to fossil fuels companies, and their share prices for now remain high. In our opinion, it’s not too soon to consider divesting from fossil fuels while one might still recover significant value.

Coal, oil, and natural gas, though, are the main sources of energy that have gotten civilization this far (at least since the late 1700s, or the entire industrial revolution), so why are many expecting them to so quickly diminish in importance?

Mostly because of recent innovation and renewables’ efficiency and cost gains. Our ‘next economy’ thesis and methods of portfolio construction assert that energy and material resources we need to host an indefinitely thriving economy exist in more than sufficient quantities (particularly energy), if we would only collect and use them in smart and efficient ways. The innovations required to put world economies on a long term sustainable path largely exist today. For example, the various forms of solar energy collection have become so efficient over the last 20 years that all of civilization’s energy requirements could presently be met by covering 0.3 percent of the earth’s land surface with solar panels and concentrated solar thermal systems. Our models insist that through promoting true sustainability solutions in materials and energy, we can indeed maintain a healthy, thriving biosphere, all while growing our economies and improving standards of living everywhere, for everyone.

This in mind, we put together 10 primary reasons why fossil fuels investments, in next economy terms and indeed in general economic terms, no longer appear to be the attractive source of risk-adjusted returns they have historically been.

Fossil fuels are economically becoming subprime because:

1. Fossil fuels have the capacity to threaten basic systems.

[Plantagenet]

If SF and other PC bastions want to make a case that they are divesting oil stocks because they don't think they are good investments, then let them do so.

But that isn't what is happening.

SF politicians are divesting oil stocks because they think oil is evil and not Politically correct.

And then, after they are done bloviating about evil oil companies, these limousine liberal politicians get in their Audis and Mercedes Benz sedans and SUVs and they drive home.


"Sell the oil stocks---they aren't PC" ---Jeeves, bring the limo around the back

[Graeme]

Passed: fossil fuel divestment AIW

$this->bbcode_second_pass_quote('', 'G')eneral Assembly delegates voted overwhelmingly Sunday afternoon to adopt the Action of Immediate Witness “Consider Divestment from the Fossil Fuel Industry,” which calls for delegates to “begin a denomination-wide conversation within their congregations about divesting from fossil fuels or exercising shareholder influence.”

During debate on the plenary floor, those at the “con” microphone primarily focused on the probable lack of impact that the UUA divesting from fossil fuels would have, and on the idea that it should have been a Congregational Study/Action Issue rather than an Action of Immediate Witness. Those at the “pro” mic emphasized the moral obligation of UUs as a people of faith to consider the environmental impact of investing in fossil fuels, and also noted that the language of the AIW had been framed specifically as a conversation about both divestment and shareholder advocacy as methods for socially responsible investing.

The topic of divestment and shareholder advocacy has come up several times during the week and was discussed Thursday at a panel discussion called “The Climate Change Challenge to Faithful Investing.” The original intention behind the divestment AIW was to call for the UUA to divest from fossil fuels, but because only a business resolution could call for divestment, legal counsel advised it be redrafted as an AIW. During a miniassembly on Saturday, language was added regarding the possibility of exercising shareholder influence.

The divestment AIW was one of three proposed AIWs delegates chose yesterday from a list of six to add to Sunday’s agenda. Drafts of the three proposed Actions of Immediate Witness are available in today’s CSW Alert! (PDF).

[Plantagenet]

And then after voting to divest fossil fuels, the UUA folks all got in their cars and drove on home.


When people in the UUA and other groups voted to divest from South Africa because they didn't support apartheid, they could honestly say they didn't practice apartheid in their own lives. But when they vote to "divest" from the oil biz, and then in their own lives buy oil, patronize oil companies, and use oil in many facets of their own lives, thats makes them FlAmInG HyPoCrITeS!

[Graeme]

But don't you just love democracy!

$this->bbcode_second_pass_quote('', 'G')eneral Assembly delegates voted overwhelmingly Sunday afternoon to adopt the Action of Immediate Witness

[Graeme]

Two More Finance Institutions Divest From Fossil Fuels

$this->bbcode_second_pass_quote('', 'S')torebrand, a Norwegian financial services group, and Dutch bank Rabobank have become the latest companies to announce they will pull out of the investments in the fossil fuel industry, citing the stability of long-term investments as the major factor.

Storebrand has investments in 13 coal and six tar sands enterprises which it will let go. It said in a statement that it believes these stocks will be “financially worthless” in the future.

“If global ambitions to limit global warming to less than 2 degrees Celsius become a reality, many fossil fuel resources will become unburnable and their financial value will be dramatically reduced,” said Christine Tørklep Meisingset, Head of Sustainable Investments.

“Exposure to fossil fuels is one of the main sustainability challenges facing business, so for us it is a logical and necessary step to adjust our investments accordingly,” she said.

The decision was made public a day after a similar announcement from Rabobank, an ethical Dutch bank with a partnership with WWF. This institution, which specialises in financing agriculture and food businesses, has said it will no longer invest in shale gas or tar sands.

It said it believes that the risks of water and soil contamination from fracking, and the risks to biodiversity, ecosystems and local residents, are too high.

It will also refuse loans to farmers who decide to lease their land for such purposes.